Correlation Between Summit Materials and Sydbank

Can any of the company-specific risk be diversified away by investing in both Summit Materials and Sydbank at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Summit Materials and Sydbank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Summit Materials Cl and Sydbank, you can compare the effects of market volatilities on Summit Materials and Sydbank and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Summit Materials with a short position of Sydbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Sydbank.

Diversification Opportunities for Summit Materials and Sydbank

0.75

Correlation Coefficient

Summit Materials  Sydbank

Poor diversification

The 3 months correlation between Summit and Sydbank is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials Cl and Sydbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sydbank and Summit Materials is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Summit Materials Cl are associated (or correlated) with Sydbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sydbank has no effect on the direction of Summit Materials i.e., Summit Materials and Sydbank go up and down completely randomly.

Pair Corralation between Summit Materials and Sydbank

Assuming the 90 days trading horizon Summit Materials Cl is expected to generate 1.52 times more return on investment than Sydbank. However, Summit Materials is 1.52 times more volatile than Sydbank. It trades about 0.09 of its potential returns per unit of risk. Sydbank is currently generating about 0.0 per unit of risk. If you would invest  3,901  in Summit Materials Cl on September 24, 2024 and sell it today you would earn a total of  1,149  from holding Summit Materials Cl or generate 29.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.33%
Values	Daily Returns

Summit Materials Cl  vs.  Sydbank

Summit Materials

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials Cl are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Summit Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sydbank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sydbank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Sydbank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Summit Materials and Sydbank

The main advantage of trading using opposite Summit Materials and Sydbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Sydbank can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sydbank will offset losses from the drop in Sydbank's long position.

The idea behind Summit Materials Cl and Sydbank pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.